Tag Archives: emerging business models

Earlier in this blog I hazarded a prediction that 2012 would be “the year for online video”. As usual, I was a little early – it turned out to be 2015. But what a year it’s been.

The long-anticipated arrival of Netflix in the region prompted many in the traditional television business to take a good, sharp look what this might mean for their bottom lines. The prospect of vast catalogues of content available anytime, on any device and without ads – all for the equivalent of a couple of coffees a month – would naturally seem disconcerting to a business that is used to controlling what you see, when you see it and how long it takes you to see it. And which, of course, jams in up to 16 minutes of ads an hour (even if you’re paying to watch it. You know who I mean, Foxtel).

The difficulty with to responding effectively to business disruption of this kind is the risk that success poses to your existing revenue stream. This explains why the first serious catch-up TV services available online were provided by those with independent means – public broadcasters like the ABC, SBS and BBC. For everyone else, the fear is that each person who watches a TV episode online is one who doesn’t watch it on TV, and for every dollar in advertising revenue lost from broadcast only cents are recovered in online advertising. This is a trend newspapers have rued for over a decade now.

Even though they are now more universal, catch-up services all suffer from the same limitations as their bigger broadcast siblings. By its very nature, a catch-up offering only becomes available after it has been broadcast, and if it has taken six months to get from the US to Australia then most of the country has probably already downloaded it. Even once available only a few episodes can be seen at a time within the catch-up “window” (typically 7-14 days). So catch-up is still effectively “appointment-to-view”, it just doesn’t matter as much if you’re fashionably late.

Many traditional media companies (and more than a few aspirants) have, in their defence, decided to give it a go and engage their audiences in new ways before Netflix simply took those audiences from them. Although when I work with broadcasters and operators on these kinds of services I invariably find myself talking to quasi-independent “digital ventures” within the organisation whose documents are the sort that self-destruct after five seconds and whose accommodation is remote and dingy, but discreet.

But what happens when the novelty of watching whole seasons of TV shows from our youth wears off? Where will new – particularly local – content come from under this new business model? Netflix and Amazon have both demonstrated that they can commission television the equal of anything seen on a broadcast network. A promising start, but the economics of the Australian media landscape are significantly tighter, something apparently keeping ABC chief Mark Scott up at night. Describing traditional television as a “burning platform”, he wonders who will fund production of local content in the new media landscape.

And by local content he means the good stuff, not reality TV. Let it not be said that I have anything against shows like Australia’s Next Top Master Renovating Triple-Threat Factor. They just cost bugger all to make and add about as much to our cultural fulfillment.

While Mark has never had to flog ads or hammer out sponsorship deals while at the ABC, he makes an excellent point. With Netflix, Apple TV, Amazon and the like, we’re no longer just taking overseas content and putting ads around it on our own broadcasters, who might then use some of that revenue to commission local content. These new platforms control the content, the broadcast platform and – crucially – the revenue stream, lock, stock and barrel. The money may potentially get sucked straight out of the country without going anywhere near a local clapper-board.

Encouragingly, local media disruptors Stan and Presto are commissioning their own content very early in their young lives and even Netflix claims to be interested in making Australian content. It remains to be seen whether this is sustainable beyond the first flush of combat between the local guerrillas and the invading juggernauts.

I was interested to note that online piracy has become a diplomatic issue in Australia, with the recently appointed US ambassador quoted in the SMH. It seems that Game of Thrones has made itself as famous for the extent to which it has been illegally downloaded as for its racy take on the fantasy genre. Nowhere more avidly than in Australia, it seems – thus the ambassador’s concern.

While I’m not sure we’re quite at the stage of a diplomatic incident just yet, the US is known for pressuring other governments – Australia’s included – to beef up their intellectual property regimes in order to secure favourable trade terms. This is of potential concern for Australians, given that studio lobbyists seem to have an disproportionate influence on US lawmakers, resulting in over-enthusiastic regulatory attempts (SOPA being a good example of this, as discussed in an earlier post).

Meanwhile, later in the same article the Australian Federation Against Copyright Theft (AFACT) alludes to surveys showing that people pirate content “because it was free”. While naturally cynical about such citation-free references, I also think this is an overly simplistic assessment.

A better explanation for the piratical proclivities of audiences can be found in the lack of widespread alternatives to the appointment-to-view model of traditional broadcast, especially in Australia. Afraid of cannibalising a business model that’s increasingly out of step with audiences, the studios are leaving money on the table by ignoring online distribution channels. Were online alternatives available that were easy to use and worked without fuss across the devices used by consumers, I believe people would pay (within reason) rather than tangle with torrenting, which as a consumer experience leaves much to be desired.

Of course content owners are entitled to make money – why else invest in making content? But there are limits to how long you can ignore your market’s needs and dictate how consumers use your product while still expecting to maintain revenue streams.